SEC NEWS DIGEST

Issue 2012-140 July 20, 2012

Enforcement proceedings

Commission Revokes Registration of Securities of Brilliant Technologies Corporation for Failure to Make Required Periodic Filings

On July 20, 2012, the Commission revoked the registration of each class of registered securities of Brilliant Technologies Corporation (BLLN) for failure to make required periodic filings with the Commission.

Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, BLLN consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to Brilliant Technologies Corporation finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of BLLN’s securities pursuant to Section 12(j) of the Exchange Act. This order settled the charges brought against BLLN in In the Matter of Advanced BioPhotonics, Inc., et al., Administrative Proceeding File No. 3-14815.

Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .

In the Matter of Charles L. Rizzo and Gina M. Hornbogen

The United States Securities and Exchange Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Section 15(b)(6) of the Securities Exchange Act of 1934 (Order) against Charles L. Rizzo (Rizzo) and Gina M. Hornbogen (Hornbogen). The Respondents consented to the entry of the Order without admitting or denying the Commission’s findings.

The Order bars Respondents Rizzo and Hornbogen from associating in a supervisory capacity with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. The Order also orders that Respondent Rizzo pay disgorgement of $35,079, prejudgment interest of $7,731, and civil penalties of $130,000, and that Respondent Hornbogen pay disgorgement of $15,592, prejudgment interest of $3,467, and, in light of her financial condition, civil penalties of $25,000. The Order also creates a fair fund for the monetary sanctions collected in this matter pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002.

In the Order, the Commission finds that Respondents Rizzo and Hornbogen failed reasonably to supervise Steven Salutric (Salutric), who, while acting as an investment adviser for Results One Financial, LLC, misappropriated $7 million from fifteen of his advisory clients. The Order finds that between 2004 and 2009, Rizzo and Hornbogen failed to investigate numerous serious red flags indicating misconduct by Salutric while permitting his continued access to his victims’ accounts. For example Order finds that Charles Schwab & Co. alerted Rizzo and Hornbogen to numerous suspicious transactions in Salutric client accounts, including a forged client signature. The Order also finds that Rizzo was concerned that Salutric might be operating a Ponzi scheme in connection with these transactions. The Order also finds that Results One’s attorney advised Rizzo and Hornbogen to contact all clients who were affected by the suspicious transactions, but that they ignored this advice. (Rel. 34-67479; IA-3436; File No. 3-14641)

SEC Charges CEO With Insider Trading in Secondary Offering of Company Securities

On July 19, 2012, the Securities and Exchange Commission charged the chairman and CEO of a Santa Ana, Calif.-based computer storage device company with insider trading in a secondary offering of his stock shares with knowledge of confidential information that a major customer’s demand for one of its most profitable products was turning out to be less than expected.

The SEC alleges that Manouchehr Moshayedi sought to take advantage of a dramatically upward trend in the stock price of STEC Inc. by deciding to sell a significant portion of his stock holdings as well as shares owned by his brother, a company co-founder. The secondary offering was set to coincide with the release of the company’s financial results for the second quarter of 2009 and its revenue guidance for the third quarter. However, in the days leading up to the secondary offering, Moshayedi learned critical nonpublic information that was likely to have a detrimental impact on the stock price. Moshayedi did not call off the offering and abstain from selling his shares once he possessed the negative information unbeknownst to the investing public. Instead, he engaged in a fraudulent scheme to hide the truth through a secret side deal, and proceeded with the sale of 9 million shares from which he and his brother reaped gross proceeds of approximately $134 million each.

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, STEC’s stock price increased more than 800 percent from January to August 2009 as the company reported higher revenues, sales, and margins for its products, particularly its flagship flash memory product called “ZeusIOPS,” a solid state drive (SSD). The stock rise also came on the heels of STEC’s July 2009 announcement of a unique agreement with its largest customer, EMC Corporation, which agreed to buy $120 million worth of ZeusIOPS in the third and fourth quarter of 2009. Moshayedi touted the sales growth of ZeusIOPS and said the agreement with EMC was “part of the expected growth” for STEC going forward.

The SEC alleges that as the Aug. 3, 2009 date for the secondary offering approached, Moshayedi learned in the course of his CEO duties two critical pieces of nonpublic information indicating that EMC’s actual demand for the ZeusIOPS was lower than previously expected. First, Moshayedi learned that EMC’s actual demand for the ZeusIOPS product in the third quarter would only be approximately $34 million – not nearly enough to ensure that STEC’s third quarter revenue guidance could meet or exceed consensus analyst estimates. Analysts had increased STEC’s revenue guidance estimates for the third quarter after STEC announced the agreement with EMC. Second, EMC informed Moshayedi that it would never again enter into a similar agreement with STEC.

According to the SEC’s complaint, Moshayedi responded by entering into a secret side deal with EMC in order to meet third quarter consensus revenue estimates. Moshayedi convinced EMC on July 29 to take $55 million of ZeusIOPS product in the third quarter – far more than it actually needed – in exchange for an undisclosed additional $2 million price discount on the product in the fourth quarter. After securing this deal, STEC announced the orchestrated guidance figures that amounted to approximately $21 million more than EMC’s actual forecasted demand for the quarter. And even though EMC unequivocally informed Moshayedi on the morning of August 3 that it would not make further volume commitments, he withheld this critical information from investors prior to his secondary offering while at the same time touting in public documents the future growth of the ZeusIOPS product and the importance of the STEC-EMC $120 million agreement.

The SEC’s complaint charges Moshayedi with violating the anti-fraud provisions of U.S. securities laws and seeks a final judgment ordering him to disgorge his own ill-gotten gains and the trading profits of his brother Mehrdad Mark Moshayedi, pay prejudgment interest and financial penalties, and be permanently barred from future violations and from serving as an officer and director of any registered public company. [SEC v. Manouchehr Moshayedi, Civil Action No. CV12-1179 JST (MLGx), USDC, CD Cal.] (LR-22419)

SELF-REGULATORY ORGANIZATIONS

Approval of Proposed Rule Change

The Commission granted approval of a proposed rule change (SR-NASDAQ-2012-062) submitted by The NASDAQ Stock Market LLC pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to modify its corporate governance rules. Publication in the Federal Register is expected during the week of July 23. (Rel. 34-67468)

Order Instituting Proceedings to Determine Whether to Approve or Disapprove Proposed Rule Changes

The Commission has issued an order instituting proceedings under Section 19(b)(2) of the Securities Exchange Act of 1934 to determine whether to approve or disapprove a proposed rule change (SR-NYSEArca-2012-28) filed by NYSE Arca, Inc. to list and trade shares of the JPM XF Physical Copper Trust pursuant to NYSE Arca Equities Rule 8.201. Publication in the Federal Register is expected during the week of July 23. (Rel. 34-67470)

Designation of Longer Period for Commission Action

The Commission has designated a longer period for Commission action under Section 19(b)(2) of the Securities Exchange Act of 1934 on a proposed rule change (SR-FINRA-2012-026) filed by Financial Industry Regulatory Authority, Inc. relating to the handling of stop and stop limit orders. Publication in the Federal Register is expected during the week of July 23. (Rel. 34-67471)

SECURITIES ACT REGISTRATIONS

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.